A two-year project with a budget of US$2 million has completed about 60% of the work at the end of the first year. The actual cost incurred to complete the remaining 40% of work is about US$1.5 million. As a part of performing a specialized risk analysis, the calculated schedule performance index (SPI) is 1.2 and cost performance index (CPI) is 0.53.
How should the risk manager interpret such a low CPI value?
The CPI, or Cost Performance Index, is a measure of cost efficiency in completing the work. A CPI value less than 1 indicates that the project is over budget, with more money being spent than planned for the work accomplished. A low CPI value of 0.53 demonstrates significant cost inefficiency, which suggests that the cost control processes are not effective in managing and controlling project costs.
As 294, Option A is correct one.